OMWD Earns AAA Rating and Immediately Refinances Bonds, Saving $3.68 Million
Olivenhain Municipal Water District issued on Wednesday $15.99 million of 2016A Water System Revenue Refunding Bonds through a competitive sale. The successful bond sale will result in savings to OMWD ratepayers of an estimated $3.68 million over the 22-year life of the bond, which equates to $2.75 million in net present value savings.
To take advantage of historically low interest rates, OMWD’s Board of Directors approved at its July 20 meeting refinancing its current Financing Authority Water Revenues Bonds Series 2009. OMWD received six bids through a Request for Proposal process and selected Raymond James & Associates, Inc. on the basis of price competitiveness.
OMWD was able to achieve highly preferable rates during bond refinancing as, on September 8, Fitch Ratings, a global rating agency that offers independent credit opinions, upgraded the rating for OMWD’s revenue bonds from “AA+” to “AAA” with a stable outlook. In doing so, Fitch cited OMWD’s historically high liquidity, manageable borrowing plans, conservative financial forecasting, and equitable and disciplined rate-setting. AAA is the highest possible rating assigned by Fitch. Additionally, Standard & Poor’s, another major rating agency, reaffirmed OMWD’s AA+ rating with a stable outlook, citing extremely strong enterprise and financial risk profiles as well as good management policies and practices.
Higher bond ratings equate to a lower risk of default, so achieving this recognition affords OMWD lower interest rates when issuing bonds to finance critical new water facilities or refinance existing obligations. Since the debt will be repaid over many years, any improvement in the interest rate for repayment of these bonds will benefit all ratepayers by reducing pressure on future water rate increases.
“OMWD is proud to be the only water agency in San Diego County with a Fitch rating of AAA,” stated Larry Watt, Treasurer of OMWD’s Board of Directors, who served on the Ad Hoc Finance Committee for this bond sale. “Our board strives to protect ratepayers from bearing undue financial burden, and taking advantage of low interest rates to save millions of dollars helps to accomplish this goal.”
OMWD’s board has set a clear policy to seek every opportunity to contain costs in all operations and maintain a high level of customer service. The substantial savings through the bond refinancing was an opportunity to achieve both of these objectives.
The 2009 bonds were issued to finance construction of improvements and modifications to OMWD’s existing David C. McCollom Water Treatment Plant and to reimburse OMWD for capital expenditures related to its Unit AA Raw Water Pipeline and other pipeline replacements projects.